Should India go big or small? Lessons from governments of the UK and East Asian countries

Liz Truss, the unlamented former British prime minister, has given the "low taxes, high growth" framework a bad name. Deservedly so, because there is in fact no clear relationship between income-tax rates and economic growth. In general, the advanced economies have higher tax rates than the rising economies of East Asia, where tax rates peak around the 35 per cent level. Britain's peak income-tax rate of 45 per cent is not very different from the average for the euro area, somewhat higher than in the US and lower than in Japan. Among the advanced economies (leaving out places like Singapore),…